MRO purchases in the packaging industry are often made more complicated by strict health and safety rules but that doesn’t mean there aren’t opportunities to make efficiencies
The UK’s packaging, plastics and paper industries have a number of challenges in common when it comes to Maintenance, Repair and Operations procurement (MRO). These are industries where there is a lot of competition, margins are often tight and raw material costs vary hugely with currency fluctuations, such as those seen recently following the vote to leave the EU. As such, there is significant pressure on organisations to find efficiencies that will help their bottom line, and MRO is an area where significant savings can be made.
However, it is also an area, according to Del Tiwana, Industry Sector Manager at RS, that is often ignored by companies. “MRO can seem pretty complicated, which means that in some cases businesses don’t understand it, and even if they do, they may feel it’s not worth the effort to tack their MRO strategy,” he explains.
The fact is that these manufacturers often run numerous pieces of plant machinery and order large amounts of replacement parts, tools and components over the course of the year. “There is a big focus on sustainability,” says Tiwana. “While a small number of the biggest companies choose to replace old machinery with more sustainable, newer models, others don’t have the capital to invest in a large amounts of new equipment, so it is about getting extra life out of old machinery.”
While this strategy is understandable in cost terms, it makes it vital to have a good MRO strategy in place, along with suppliers you can trust so that when machines do break down, it won’t cost your business money. As Helen Alder, the Chartered Institute of Procurement and Supply’s head of knowledge and product development, explains: “Organisations don’t always understand what MRO is, and therefore they do not see the need or value in having a strategy in place.
“The most significant reason for getting this right is that among the products you purchase will be items that would cause your operations to grind to a halt if they went wrong and you can’t replace them quickly,” she adds. “Ultimately, the most important thing is to keep your business running so that you don’t have downtime that incurs costs and affects profitability.”
The answer is to work with fewer, trusted suppliers who carry the stock that engineers require and can deliver those products in the time required. For the packaging industry, this is made more complex by the need for a number of specialist parts or specific types of PPE safety-approved equipment. “With PPE, if it is not right for the employee – if the footwear, gloves, ear defenders or glasses and so on are not correct – then the employee has the right not to work,” explains Tiwana. “As such, it’s very important to get this right, so our customers work with RS because we have knowledge and expertise on PPE and other specific products that are required by health and safety rules governing the sector.”
Reducing “maverick” spending
This leads to another potential risk area with MRO procurement, both in terms of costs and actual safety – “maverick spending”. “This is a massive risk,” says Alder. “Buying parts from a non-approved suppliers may cost more and possibly take longer to source, but the biggest issue is the quality of the parts. It’s not unknown for engineers or other employees to search the internet and buy parts that turn out to be counterfeit, or that don’t meet the required quality levels. Where you have these products going into machines with moving parts, you have potentially very serious consequences if they go wrong.”
By working with a small group of approved suppliers, ideally ones that provide an integrated eProcurement system, which makes ordering easier for the end user, its possible to dramatically cut maverick spend and streamline the entire MRO process.
"So many manufacturers have stores full of all sorts of different brands and products, which are all classified as working capital"Del Tiwana, Industry Sector Manager, RS
The final area that companies should be reviewing is the amount of MRO stock it holds on premises. “So many manufacturers in this sector have stores full of all sorts of different brands and products,” says Tiwana. “And if you’re holding stock it is all classified as working capital. At RS we can help customers review that stock and in many cases most of it isn’t needed because we can deliver replacements next day, which frees up space and working capital.
“And, if a company has stock that is definitely needed on-site, it’s possible to use consignment stock. This is where products are located in a company’s premises but are owned by the supplier. This way they only pay for it when they use it; it’s not on the books but it’s ready and available when they want it.”